All posts tagged Europe

Notwithstanding its own economic problems, the U.K. is a beacon for the euro zone’s mass of unemployed youth. This presents both an opportunity and an enormous risk for British policymakers.

Richard Lambert, the former director-general of the Confederation of British Industry, highlighted the basic point in a recent Financial Times editorial: in the three months to December, the number of Britons in work fell by 166,000 while during the same period the number of non-U.K. nationals finding work rose by… (drum roll)… exactly 166,000.

Looking at youth unemployment for the third quarter of last year for reasons of comparison, in Greece it stood at 46%, in Spain at 48%, in Ireland and Portugal at 30%. In the U.K. it was 22%, about the European Union average. And in Germany, for the record, it was 8.6%.

Those rates, by the way, have gone up everywhere except in Germany, where they’ve fallen.

Under such circumstances, it would make sense for Spanish, Irish, Portuguese and Italian youth to travel to Germany to find work. But…

A German-backed compromise to boost the lending capacity of the euro-zone’s rescue funds is set to win the backing of euro-area finance ministers in Copenhagen on Friday and officials are also likely to pick a new member of the European Central Bank executive board, according to European Union officials.

The two-day meeting in Copenhagen will also see discussion of Spain’s 2012 budget plans, due to be announced Friday amid fresh concerns about the country’s struggling economy and banking challenges.

Under the favored option, the region’s bailout funds would rise to a minimum €650 billion ($799 billion) by July.

The arrangement would see the transitional European Financial Stability Facility continue running until June 2013 in parallel with the new, permanent bailout fund, the European Stability Mechanism. The EFSF will maintain its €200 billion of commitments to the Greek, Irish and Portuguese bailouts but its spare lending capacity of €240 billion is expected to be wiped out after mid-2013.

With Greece’s problems ‘solved’, or at least kicked into the long grass, fewer signs of contagion spreading to the euro-zone’s other troubled nations like Italy and Spain, the financial markets rallying, and confidence returning among consumers and businesses, European leaders could have been forgiven for thinking they’d earned their salaries, and more.

Now, not quite out of the blue, an unwelcome visitor has returned – the specter of recession.

We all knew that China is slowing. Indeed, there were hopes that the authorities had succeeded in lowering the temperature gradually of an overheating economy, thereby avoiding a sudden and catastrophic freeze. On Thursday, however, came an indicator suggesting that it’s now cooling too quickly.

The HSBC preliminary manufacturing purchasing managers’ index, or PMI, fell to 48.1 in March, a four-month low, compared with a final reading of 49.6 in February.

Temperatures will average higher than normal across parts of Europe until June, Weather Services International said Monday, as the region’s wheat crops continue to suffer from prolonged dry conditions.

A Greek deal has been done but the markets are not in a mood to celebrate and Chinese trade data suggests a harder landing than expected. Dow Jones’s Martin Essex has been looking at the stories affecting the markets today.

Is Europe fixed? Greece got its debt restructuring, and bailout funds are coming. Banks across the continent have gorged on cheap cash, in some cases enough to cover their financing needs for years. Yields have dropped across the euro-zone periphery. Investors are, dare we say it, bullish.

So why worry? Because there are two fundamental problems that haven’t yet been solved.

The first is how do peripheral European economies regain competitiveness?

The second, related, problem is how do you distribute the costs of past debts incurred by those same economies?

Germany is reshaping Europe in its own image to a degree that would have been unthinkable not that long ago.

And incredibly, its actions appear to have the support of most Europeans.

That may be partly because its current leaders—a woman, a disabled elderly man, a Vietnamese immigrant and an openly gay man—don’t project raw Teutonic power.

A survey published Tuesday by polling institute TNS Sofres found that a large majority of French people think the European Union should have more control over national budgets.

That indicates strong support for the German-led “‘fiscal compact,” which aims to boost fiscal discipline among EU states and impose tough sanctions on fiscal sinners, even if French Presidential challenger Francois Hollande has stated his opposition to the pact.

Last week, 25 of the EU’s 27 states signed up to the accord. Support is such that Spanish Prime Minister Mariano Rajoy and Italy’s technocrat leader Mario Monti have reportedly agreed not to meet Mr. Hollande because of his said opposition.

Europe’s leaders must surely know that the latest rescue plan for Greece will not work, former U.K. Prime Minister Gordon Brown says.

Accusing Europe’s leaders of shortsightedness, he says the unfolding tragedy of a bankrupt Greece is a symptom of a fundamental miscalculation – “a wrong-headed conviction, widely held across Europe, that if austerity is failing, it is because there is not enough of it.”

Writing in the Washington Post, the man who was prime minister of Britain from 2007-2010 following 10 years as Chancellor of the Exchequer, says holding dogmatically to a policy of ever more austerity despite all the evidence of stagnation, Europe now threatens the economic recovery of not just the euro area but also the wider world.

Europe’s problems look increasingly as though they are part of a global transfer of economic power, where production, investment and demand shift from west to east.